Following a prime-time attack on carried interest by President Barack Obama, the private equity industry’s lobby group appears to be girding up for a fight regarding carried interest.

The Private Equity Growth Capital Council group is making a case for carried interest in a handy white-board video somewhat reminiscent of the graphics from the hit MTV Show “16 and Pregnant.”

Seeking to dispel “a general misperception of what carried interest is,” the video explains that capital gains is “appropriately taxed as investment income” using the example of Mary and Jen, two sisters who want to open a restaurant together.

Using the word “sweat equity” several times, the video patiently explains that Mary, the limited partner, puts up the metaphorical dough and Jen, the general partner, uses her skills to make the literal dough, and that both are “treated equally” by the tax code “because of their contributions to growing the enterprise.”

This seems a bit confusing, simply given the fact that several types of limited partners, namely public pension plans, non-profits and endowments, are tax exempt.

Admittedly, the video isn’t necessarily designed to argue for or against carried interest, but rather “demystifies the topic and answer questions about what carried interest really is,” according to a synopsis of the film from the PEGCC.

A PEGCC spokesman said the group’s target audience is “policy makers, regulators, national and regional political media and politically engaged individuals.”

The president isn’t the only one gunning for carried interest. Rep. Sander Levin, D-Mich. and ranking member of the House Ways and Means Committee, said on Bloomberg TV that he hoped the PE industry would help shape the new policies regarding carried interest.

Opponents have argued taxing carried interest as income would likely only bring in between $10 billion and $16 billion over the next 10 years. By the PEGCC’s estimate, that amounts just enough to fund about 3.1 hours of federal government operations per year.

“Capital gains has never just been reserved for those who invest capital, it’s reserved for those who invest capital or labor, and that’s what we’re trying to represent,” said a PEGCC spokesman. “We feel like there’s a very strong argument from a historical and legal perspective for why carried interest is taxed as a capital gain.”

At the same time, industry executives have expressed resignation at the prospect that changes to carried interest are likely ahead, with some, including Fred Wilson over at Union Square Ventures, even speaking out in favor of the changes in the past.

“Changing the taxation of the managers will not reduce the amount of capital going to productive area,” Wilson wrote on his blog in 2010, when the House of Representatives passed a bill to modify the taxation of carried interest. Wilson predicted that a change in the tax law could lead deal makers to invest more of their own capital, which he described as “a good policy,” noting the correlation between returns and “skin in the game.”

“If these tax changes produce more ‘skin in the game,’that will be a good thing,” he wrote.

Comments (1 of 1)

How dare the lowly peasants complain about the scam carried interest rate the plutocrats like Cayman Islands Mitt and his would be wall st puppet masters enjoy while everyone else must pay the full federal rate! How dare they complain!